Saving is the backbone to any sound financial plan.
As the saying goes, a penny saved is a penny earned, but sometimes just finding that penny to save can feel like a challenge. Many who struggle to start saving for their future find the “pay yourself first” method to be a simple yet powerful approach. While most people will go through their monthly expenses and try to save what is left over, the pay yourself first plan reverses the process and forces you to meet your savings goal before spending money anywhere else.
If you’re having problems jumping on the savings bandwagon, try these pay yourself first tips and tricks to get on the right track:
- Follow the rules and actually pay yourself first, not second or third and definitely not last.
- Start slowly and work your way toward a comfortable amount. You can’t expect your checkbook to balance if you’re suddenly saving half your income. Start with a small amount like 1 percent of your paycheck and work your way up. Remember that no amount is too small to save.
- If you’re having problems getting into the habit of saving, have it done automatically through your bank or through your employer. The further removed you are from the action the less likely you are to notice and miss the extra cash.
- Once you get into the swing of saving, you can start something like a certificate of deposit to make sure you’re guaranteed the highest interest rates. Having savings directed into a certificate of deposit also increases the likelihood you will save money in the long term.
- Remember that contributing to your employer’s 401(k) or similar retirement fund is also a way to pay yourself first and invest in your future.
- Be realistic and understand that your bills and expenses will still show up even if you’ve turned over a new financial leaf. Be prepared for those unexpected expenses as well and understand that they may make a dent in your savings.
- Salary increases are a great time to start paying yourself because you won’t even notice the portion going into savings.
The most important thing to recognize about paying yourself first is that it won’t be easy. Self-discipline is essential. If you really want paying yourself first to work, you will have to cut back on your extraneous expenses throughout the month.
Once you get into the swing of things, the benefits of paying yourself first are innumerable. Whether you’re looking to start an emergency fund or building the foundation to purchase a new home, paying yourself first is a habit you will never regret.
Photo courtesy Images_of_Money